Good morning, everyone, and welcome to the Marcus Corporation Fourth Quarter Earnings Conference Call. My name is Josh, and I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. [Operator Instructions] As a reminder, this conference is being recorded. Joining us today are Greg Marcus, President and Chief Executive Officer; and Doug Neis, Executive Vice President, Chief Financial Officer and Treasurer of The Marcus Corporation. At this time, I'd like to turn the program over to Mr. Neis for his opening remarks. Please go ahead, sir.

Thank you very much and welcome everybody to our fiscal 2019 fourth quarter and year end conference call. Bear with me as once again I need to begin by stating that we plan and making a number of forward-looking statements on our call today. Forward-looking statements could include, but not be limited to statements about our future revenues and earnings expectations; our future RevPAR, occupancy rates and room rate expectations for hotels and resorts division; our expectations about the quality, quantity and audience appeal of film products expected to be made available to us in the future; expectations about the future trends in the business group and leisure travel industry and in our markets; our expectations and plans regarding growth and the number and type of our properties and facilities; our expectations regarding various non-operating line items on our earnings statement; and our expectations regarding future capital expenditures. Of course, our actual results could differ materially from those projected or suggested by our forward-looking statements. Factors, risks and uncertainties, which could impact our ability to achieve our expectations, are included in the Risk Factors section of our 10-K and 10-Q filings, which can be obtained from the SEC or the company. We'll also post our Regulation G disclosures when applicable on our website at www.marcuscorp.com. So with that behind us, let's talk about our fiscal 2019 fourth quarter and our completed fiscal year. Once again we had multiple non-recurring items involved this year and last year's report results that complicate comparisons to the prior year. So we attempt to get those numbers on a more apples-to-apples basis in our press release and explain each of them as this call proceeds. But with all said and done operating results were down versus last year for both the quarters and year for…

Thanks Doug. I'll begin my remarks today with our theater division. The word you're going to hear most often for me today is balanced. We've been in the movie theater business for nearly 85 years. As you know this business can be a real roller coaster. We joke internally that it seems like some days we are geniuses and other days well not so much. And for as long as we've been in this business there has been concerned for its future and yet we're still here entertaining millions. So when you operate the business like this we believe it is imperative that you take a balanced approach. Sure we care about each and every quarter but as you know we have a long-term perspective on everything we do. A balanced approach recognizes the grass doesn't go to the sky but also acknowledges that the sky is not falling either. So as I make my comments about our theater divisions fourth quarter and fiscal year you're going to hear what I hope you will agree with will be a balanced perspective. So let's start with our fourth quarter and fiscal 2019. As anyone who follows this industry knows it was a challenge. We all know that our industry was playing catch-up all year long after starting the year with a very difficult comparisons during the first quarter. We had a high hopes for the fourth quarter as we knew we had several blockbusters lined up in late November and into December and sure enough the Frozen, Jumanji and Star Wars films ended up being three of our top four films for the quarter. But we didn't count down was October and early November film comparisons to last year being as difficult as they were. Last year our top four films…

Thank you. [Operator Instructions] We'll go first to Eric Wold with B. Riley. You may proceed with your question.

Thanks and good morning guys.

Hey, Eric.

A couple of questions. I guess one, kind of a for each the two division I guess. Doug, as you think about the 2020 CapEx guidance of the theaters of 45 million to 60 million, how much of that would you kind of say as toward holding and maintenance versus ROI generating activities. And then, you obviously and what point would you say here in the cycle and also will be covered now in the mix but shifts although. So, maybe going to think about both the legacy theaters, legacy market theaters and Ehrenberg versus Movie Tavern and where are you in that cycle in terms of where do you expect that CapEx and the decline meaningfully in the theater side?

Sure. Well look, I would say of that we gave a range for theaters of 45 to 60. And I will tell you, to get to that high-end that'll take a bunch of projects to accelerate and move pretty quickly. So, I don’t know they'll get to that high as when we provide the range. I'd say probably half and half in terms of the mix. We've got several legacy locations that we're taking a look at in terms of ones that we still haven’t done DreamLounger's or some other amenities related to that. We're working on a Movie Tavern location right now as we speak. There is another one or two that we're taking a look at is and as Greg mentioned, we do have a new build in that mix as well. So, keep in mind that there are some dollars in there for a building in Tacoma, Washington that we're. And it includes landlord contribution as well but we have obviously components that we have to contribute to. So, I would say it's probably if we end up on the low-end of that range, it'll probably be about 50/50 between we'd call ROI and maintenance. Maybe eschewed maybe 60/40. If we end up on the high-end of the range, it'll be because there's more ROI projects too. Because the maintenance CapEx is pretty consistent in this division that can and ranging in that $10 million to $20 million range depending on how many projects we have to do.

Okay. And then, how much of that is the new work which's going on new build?

It's we're not going to give you the exact number but it's in the millions but its single millions.

It's a lease.

It's a lease and so that -- so there's a significant landlord contribution but we start to put some of the FFE in and some additional dollars as well. So, it's in that range.

Okay. And then secondly on the hotel side, obviously Milwaukee markets getting a nice news this year from a number of things you laid out. I guess, which hopefully rising tide this -- this all boats there, but I guess other than that what do you see in kind of competitive environment in your key markets, compares being more rational as people kind of constantly favored in towards the end of the cycle there. And then, lastly on Saint Kate. Now we're kind of six months past opening, what are your thoughts on kind of where your occupancy in AER levels are versus which you would have thought given you acknowledging this is a new brand, you're going to have to build from scratch.

What are we seeing in other -- or look by the way I want to say Milwaukee. Remember it, as we pointed out in the call. I do believe it's not just a one-year thing. I mean, we should look at it, it's a good year. There's no double about it. But we will be increasing the size of our convention center here. Although the state passed a more obligation gave us some more obligation, so that's in the works. We and again that we know that, we studied other markets that have had things like DNCs and seen their long-term halo effect and something like that has for a market like ours and whereas we're already seeing increased activity at our convention visitors bureau and that's long-term business. So, I just want to point out that we're we have a significant investment, we see a long-term benefit. Look at, we are seeing like everybody else, lots of buildings in the different markets. We tend to be central city. So, they are getting absorbed but it's not as robust as it was five or six years ago, when we are receiving high single-digit RevPAR increases as not as the market -- as the industry is seeing, its later it seems to be later in the cycle now we at the point where we're going to start to see a reacceleration in the cycle. Again this is it, really will just all depend on the economy. And if the economy is strong and then the hotel should all be okay but we are seeing building in certain markets. But like Chicago, they had a very rough year last year and this year it's supposed to be a good year for their convention market what should be good for hotels but they've had a lot of product. So, again it's just is market dependent as well. And Eric, and you had very more specifically asked me your Saint Kate question?

Yes. just now that we're kind of six months past the opening of that, kind of where the -- has been kind of demand occupancy ADR been relative to what you thought acknowledging that you are building a new branch from scratch?

Yes, I think we will. What we're seeing is that we're getting the rate we wanted. For the most part, we are our occupancy is not where we wanted to be yet. The most promising thing we're seeing is that our food & beverage all that's not really where we make our money. We make money on the heads and the beds. But our food & beverage is far and away ahead of our expectation. Now getting it's not really going to drive the bottle line so much. But what its showing is we have a lot of being with our presence in Milwaukee, we get great press and great coverage and when you do something like business markets. So, locally everybody knows about it as it's almost the talk of the town. It's really very exciting, you walk in there and there is a buzz in the place because and we sit in the theater district and with all the theaters going, the place is hopping. And so, we were very happy to see that. The challenge again is knowing people outside Milwaukee when they look they say where they want to stay. It's they don’t know what it is yet and it's just getting things like being on that 10 Best list and getting in kind in that. That takes up to a year to start to populate those and then when somebody googles best hotel in Milwaukee - we show up. And the algorithms in the sites, the Expedia, the Travel, the TripAdvisor, the World; we need to have a certain number of reviews. And so doing that, this is now really a marketing challenge for us in getting the word out there. And look at this time of the year and frankly the fourth quarter and sort of to what is or not strongest time. So, just in this market it's that we're much better in the summer. So, we open midsummer and so we just haven’t gotten that traction that we need here. That's much easier when people write in a lot of nice things about you.

Thank you.

Thank you. Our next question comes from Jim Goss with Barrington Research. You may proceed with your question.

Thanks. I might as well go on with Saint Kate since you're there. Would you say development of Saint Kate was a sort of a response to the challenge of the weakest of three properties in that market or was it an attempt to create a new franchise that you could recreate and franchise that template in other markets?

Well, I'd say yes. I mean but I think it's even more than that Jim. Yes that was our obviously one of, that property needed, it needed a new game plan but also it was even if it's just for that property the idea of tapping into this idea of experiential travel and what the traveler of today is looking for certain set of the travelers they want to come to a market, learn something about where they are, experience something different. That is a big trend in our industry. So even if just for that property now if it should work, well that would be great. Let's we would love to do it again but let's get the first one working.

Okay. How long is the evaluation period do you think before you figure out? I know it's still early as you've just been talking about it. There's a higher period before you figure out. Whether there's a market for it elsewhere?

I think you are exactly right. You're exactly right. It could take up to that long. I mean if something happens and it really goes crazy this summer which I have all the hope in the world that could happen well maybe it'll be more accelerated but I think it could be up to two years we really figure out what we have.

Okay and generally in the theatrical space it does seem we're moving to the end of the CapEx cycle as you've been discussing. I've wondered what direction in terms of capital allocation the theater operators are going to take? One of the options is to buy additional chains and you've already been at a leadership of doing that sort of thing as you get, do you think you have continuing opportunity to get another Warner Brother Movie Tavern and if you don't at some stage are you likely to be prioritizing share buybacks or additional dividend gains? Where you go in the capital allocation maybe this is a Doug question.

Yes. I mean and you've seen, Jim it's a really good question and I'm not sure we quite know the answer yet of what because there's a lot of different avenues this could go. You've seen the chart in our prepared materials and where we've been allocating our capital over the last six years and it certainly has been very theater focused and with a large chunk of it probably a quarter -- probably 25% of our capital going towards those two big acquisitions that you alluded to. Certainly that we will be selective about that. We always have been. We're not just a growth for growth's sake company we are smart growth company and so if there were further opportunities that's still on our radar, you're right that the piece of that the allocation over these last five, six, years that has gone towards those amenity ads primarily but the DreamLounger the large format screens and the food and beverage that piece is coming down as I just shared with you earlier that still are some opportunities for us to spend some dollars in 2020. But they're just less of those projects and so that piece is starting to come down and as you know, I mean you saw it in our numbers this year. We generate so much cash in our businesses that's a nice problem to have because our balance sheets is in incredible shape. So my best answer is we have lots of options. If something and the word we love using this company is optionality. We love to have those different options. So we're opportunistic and if we see an acquisition that we might like, great. If we don't, if we see some opportunities in the hotel business where we could start to allocate some capital and growth great. Maybe there's we've alluded to in the past about potential opportunities to kind of related type businesses. So we'll keep our eye open for things where we could potentially further invest in businesses that or things that make sense because of hitting some of our core expertise and then returns of capital. You specifically mentioned buybacks that certainly share repurchases is a tool we've used in the past. We've also used dividends in the past. We just raised our quarterly dividend. We've used special dividends in the past. I can't commit to any one of those but those are all options that are always on the table for us.

Yes. I mean I'd build on that just a little bit and just simply say look at, our strategy frankly it's really not that complicated. It starts with have a really strong balance sheet and then what we're able to do is and we have great people and take advantage of the opportunities that present themselves wherever they might be and as I think Doug would have laid it out in that orders our goal is to invest capital and properly allocate capital and at the same time provide a return to our shareholders and then we don't see the right opportunity for that capital well then we'll make a decision about the best way to return capital. But that's our game plan and I said I don't think it's very complicated but not all you need to do either.

Okay and maybe one final one for you Greg. In a year with fewer apparent blockbusters, do you typically see some of the $100 million movies becoming more than that and sort of filling in that gap outperforming expectations something that might mitigate the decline in the overall Box Office that seems like a potential challenge this year?

Absolutely that can happen. At the end of the day it will just depend on how good the movies are and I will tell you, look I've been heartened I have seen so many good movies lately so there's been this concern about the quality of, would there be a degradation the quality of the product. I mean I've seen I bet I've seen 10 to 15 movies in the last couple of months all of which I thought were really good. I went to see Gentlemen last night. I really liked it. I saw the Harlequin movie last week. I thought it was great. Richard Jewell was great. Parasite was great. 1917 cinematic masterpiece. I mean I just, I mean I've seen so many good movies which really heartens me in a long run for our business. I cannot tell you what's going to happen tomorrow. If I had that crystal ball I guess I'd probably be on a very nice island somewhere well it's about six degrees here but it is in the long run to see the quality the product hold up in the face of PPV is gives me and I look at this business on a balanced long-term way makes me feel good about it so.

Okay. Thank you very much.

Thank you. [Operator Instructions] Our next question comes from Mike Hickey with Benchmark. You may proceed with your question.

Hey Greg and Doug congrats on your quarters guys thanks for taking my questions. Appreciate it. I guess maybe just follow on Jim's question a bit, the slate is less obvious this year doesn't mean it's going to be down but I think that's probably the direction most people think. Do you think, I guess in this sort of environment where the slates not as obvious, do you think that could be the catalyst to maybe facilitate a deal with some of the OTT providers that are obviously creating pretty compelling content and I'll maybe were close last year with the Irishman maybe we weren't but I guess is this the right time maybe to show enough flex in terms of economics and windows to get a deal done for the industry both industries?

I mean look, I think, I'll say the same thing that everybody in our industry has been saying. We are open to a deal with an OTT but we have to have a window. We have to have a window that is what maintain, that is one of the things in addition to our significant investment in making this experience, such a great experience just generally. That window is one things that maintains the value of our product upstream. If they shorten the window they degrade the value because the customer says, well I can we are in a battle against the couch. I said that a bunch of times and short of the window the more attractive that that couch becomes then they, it degrades the value of what we're trying to sell and you can already see one of the reasons that $5 Tuesday is so successful we've talked about this before is because it is and the reason the studios like it this is because in a way I don't know what it brings customers back to the theater who had sort of had decided they liked the couch better but at five bucks I say the theater is better. I'll tell you an interesting statistic that I just saw in our numbers and I looked at our attendance and I looked at our attendance on Tuesdays compared to the rest of the week and if you look at take 2018 and we had a big pop if you look at 2017 and 2019 our legacy theaters you have a steady base of theaters, our Tuesday attendance was identical and yet the attendance from 17 to 19 actually dropped on the rest of the days and so look at that and yet we still outperform the industry and it's all the good things that we've been talking about but what you see is the resiliency of that customer and what they see is the value and so they have to be very, so we're very open to the idea but and we think it will be great people to play their product and we would welcome their product into our theaters. They make some great product but we have to understand what the underlying fundamentals of what the foundation of our business and make sure that stays in place.

Okay. Thanks Greg for the color. Appreciate it. Both of you made a pretty big statement about the extra week, a powerful it could be for your business. Doug you gave some math obviously you are certainly smaller but maybe the movies were better and gave that last but is that sort of little headwind, little tailwind is that sort of the right number we should be thinking about adding to our malls for the year 2020?

Well, as everyone who listens this remembers my forward-looking statements comment to begin this whole thing. Yes, I mean I think that that's why we provided that numbers for at least provide some perspective and I do appreciate that you're recognizing that in that particularly the set of numbers we had Star Wars in that and this year’s we have to third week we won't have a Star Wars but it's still a big week and sometimes I think we could show Greg's home movies and maybe do pretty well too during that week and so look, I think that that's those are reasonable placeholders to at least say that in a similar week we did that amount of business keeping in mind that the dynamic and the reason why it's so profitable is because it's basically revenues and variable costs. All the fixed costs are already accounted for on a monthly basis in our numbers and so there's no additional fixed costs that go against it. So the margin on these additional incremental revenues is fairly significant and that's why you see such a significant impact and we are not in the business of projecting specific numbers for what week could be. We obviously have some thoughts but we thought by at least providing what it was in 2015, it would least give you a nice benchmark to put in place.

Okay. Thanks. Last question for you guys obviously M&A has been the great instrument you've created some serious growth and value. I guess when you look at sort of the private theater market, theater owners, do you get any sense of a greater willingness to want to sell when market conditions are tough or when market conditions are great or is it sort of not, no real correlation? I'm just wondering how they behave in terms of maybe looking to sell a difficult market versus a good market. Thanks.

I think that it really is, it's not -- I don't know if necessarily correlated. I mean the markets we've had some bumpy quarters over the last number years but fortunately the markets are pretty good. So it's hard to really say where everybody's heads are at right now but you have to remember this is especially when generally the people we're talking to at this point, it's not always about economics these people have been maybe been in business for generations. It's a family business. They love the business and so they may look at it a little differently than others and they may and they also have longer-term perspectives too and so there may be more comfortable struggling through some of the challenge because they say as they said as I said as I started the onset of my comments literally my dad tells me every you can't remember not being worried about the business, he's been with it for 85 years and yet it seems to be something that we're able to deliver on and provide a great product and something compelling to the customer likes.

All right. Thanks guys.

Thanks Mike.

Thank you. At this time it appears there are no other questions. I'd like to turn the call back over to Mr. Neis for any additional or closing comments.

Thanks once again everybody for joining us today. We really appreciate it. We look forward to talking to you again in a couple months in late April when we release our fiscal 2020 first quarter results. Until then thank you and have a great day.

Thank you. That concludes today's call. You may disconnect your line at any time.